Even Hersheys
Just a quick chocolate post about the news that Hershey is laying off 1500 workers. Apparently, they are moving some of their manufacturing operations to Mexico. Coming from the automotive business, this sounds all too familiar. Even worse, the analyst’s comment about it sounds the same:
“Bottom-line, this plan should provide (Hershey) with far more marketing firepower, behind which to invest in its core brands … as well as new platforms,” such as premium chocolate and dark chocolate, “while still delivering margin improvement,”
My old company said the same thing. They moved operations to Mexico and focused on core business. Then they sold all the rotten plants to an OEM, and said now they would make money. They didn’t. The still lost millions and millions.
Makes me wonder what is hitting Hershey. Pressure from Mars? The US auto companies were fighting Japan but I don’t see that as an issue here. There’s pressure from European companies but I don’t think its that bad. Its possible that the market really is shifting to premium chocolate, and their low end products like kisses have a very narrow profit margin. They have union labor here in the States and I know, for automotive, the labor rates in Mexico are about a tenth of what they are here. For companies looking to reduce costs, it becomes irresistible.
The good news is that Hersheys stock history looks like this. Compare that to the automakers like Ford which looks like this. I don’t think the market feels they are in danger, but obviously they are taking more drastic measures to fix something they see as a problem.
February 16th, 2007 12:53
Jon,
I have no idea where you stand with Hershey but my opinion is that if they put their minds to producing QUALITY chocolate like the europeans do (toblerone etc), they would never have to lay people off.
February 16th, 2007 13:11
Hershy owns Scharffenberger now so they have a premium line.
When are American companies going to wise up and learn from others that moving ops to Mexico does not pay off? Really makes you wonder.
February 16th, 2007 22:32
I just happen to be wrist deep in a bag of Hershey’s Extra Dark Pure Espresso Dark Chocolate with Coffee Chips. They may last through the weekend … maybe.
February 17th, 2007 00:30
I’m not a huge hershey fan.
I’m a die hard Nestle fan
February 17th, 2007 18:07
Does any chocolate candy have sugar anymore. It’s all corn syrup. For that matter why don’t they use real vanilla either. It’s now called vanilan or something like that. Though the Hershey Park in PA is still a fun time. I wish I was at the guy David’s house.
February 18th, 2007 05:23
I can’t believe Hershey took that road,. They are like the most American thing out there! But, nothing surprises me anymore after they sold Turun Sinappi (most famous family-receipe mustard) to the Swedish last year :(
February 19th, 2007 02:31
Isn’t it too hot in Mexico for chocolate?